Costco's stock price has risen more than 10 percent in the last 12 months, while Wal-Mart's has slipped 5 percent. Costco shares sell for almost 23 times expected earnings; at Wal-Mart the multiple is about 19. Mr. Dreher said Costco's share price was so high because so many people love the company. "It's a cult stock," he said.
23:1 P/E means that this is a stock that any sober investor would trurn away from. "Cult stocks" is what the dotcoms were in the 1990s, ie horrid long term investments.
Costco is way overpriced. And nobody cannot defy the axiom "Buy low and sell high".
A Costco was built not too far from my work about two years ago. They tore down about 10 acres of woods to put it up, right next to a residential development. Other than the opening day, I have never seen the parking lot more than half full. Usually, there are only about 30-40 cars in the lot. I can't imagine how they are making any money.
Why? Some of the best long term investments ever have been in stocks with high p/e's.
"Cult stocks" is what the dotcoms were in the 1990s, ie horrid long term investments.
Whatever happened to the internet, anyway?
Cult Stock = Think Krispy Kreme